Politics & Policy

The Corner

The Republican Bet on Tax Reform

So I’ve been arguing that the Republican tax bill could be the GOP’s Obamacare. I briefly made the case on NPR this morning and at greater length in my column last week. Not surprisingly, this annoys people on the right and the left. For liberals (at least the ones sniping at me), comparing something so gloriously well-intentioned, long sought after, and central to Obama’s legacy as Obamacare to this monstrosity of a tax bill is almost sacrilegious. For conservatives (again, at least the ones sniping at me) comparing something so gloriously well-intentioned, long sought after, and central to Trump’s legacy as tax reform to the monstrosity that was Obamacare is almost sacrilegious.

Obviously, I understand there are important differences between the two pieces of legislation, but let’s run through the similarities.

Again: Both are central to the president’s legacy. Obama got more legislation through at the beginning of his presidency, but nothing that holds a candle to the Affordable Care Act. Trump has gotten other things through Congress but nothing that holds a candle to tax reform in importance.

Both pieces of legislation were unpopular when passed (I’m holding it as a foregone conclusion that tax reform passes and remains unpopular when it does).

Both were passed via an ugly process.

Both needed to be passed to truly find out what was in them.

Both were passed on a strict party-line basis.

Both were denounced by the opposing party as an apocalyptic mistake along the lines of “the end of America.”

Both were justified in long-held ideological and political priorities that go back decades.

Both passed on the ideological assumption that, once implemented, the legislation would prove to be very popular because it would, in some meaningful sense, “work.”

Both passed on the political and historical assumption that once implemented they would be very hard to repeal or reverse.

Of course, some Democrats bet that Obamacare would be good for them in the election. Others voted for it on principles, despite the fact they might take a hit. The same goes for Republicans.

You can be sure that the Democrats will fundraise off of this legislation the way the GOP did off of Obamacare.

But it remains to be seen whether the Republican bet on tax reform will pay off in a way Obamacare did not. The Democrats lost control of Congress in large part because of Obamacare. I have to believe that a big cut to the corporate tax rate will have a powerful growth effect. The changes to the income-tax code are hard to predict. They won’t actually go into effect for most beneficiaries until after the 2018 election. On last week’s episode of The Editors Michael Brendan Daugherty raised a very serious concern. No economic model predicts that the growth created by these reforms will make up for the hit to the deficit. But a lot of corporations are going to see a big boost to their bottom lines. That means we can probably expect a lot of reports about CEOs getting huge bonuses simply by virtue of the fact that they just happened to be at the helm when this passed. That doesn’t bother me that much on the merits. But it is very easy to see how the Elizabeth Warren and Bernie Sanders crowd will cast these bonuses as basically debt-financed transfer payments to fat cats. If the debt numbers are even close to what some people predict, that could be politically poisonous (which is why, even if you don’t like the child-care tax credit, it was smart politics. Anything that blunts the populist assaults on this are good both for Trump’s base and as a shield against his left-wing critics).

If the economy roars, sustainably, my hunch is that the benefits for the rich won’t count for much. But if the economy doesn’t take off or if we hit some other snag, it won’t be hard for Democrats to make this thing into an albatross. They’ve already managed to make most Americans hate this bill — unfairly in my opinion. If the economic winds blow their way, this could be their Obamacare – in the sense that it will simply be a scare word they can use relentlessly.

I’m not saying that will happen, because I don’t know what will happen. And neither does anyone else. Not really. It’s a gamble. That’s my point.

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